Are Cable Companies Scared To Compete?

Are Cable Companies Scared To Compete?

Are Cable Companies Scared To Compete?

Moneybox
Commentary about business and finance.
June 12 2001 9:00 PM

Are Cable Companies Scared To Compete?

Ah, competition.

Advertisement

As you know, our great business leaders all thrive on it. They love to compete, bare-knuckled in the wild and woolly marketplace, which is the only arena in which to sort out winners and losers—and without the meddlesome shackles of regulation preventing the invisible hand from pointing out the strong and swatting down the weak. As an example, just think of the various cable companies that are apparently refusing to air ads by firms offering DSL service as an alternative to cable modems for those wishing to have broadband access to the Internet. Explained one cable company spokesman: "There are lots of other media outlets where [DSL providers] can advertise."

Ah, dissembling. If you could commoditize it, dissembling would convert into an excellent value stock: It will always be with us, through good economies and bad. Nevertheless, this current instance of competitive rhetoric colliding with competitive reality is worth pondering. It came to light (or at least to my attention) by way of a front-page story by Seth Schiesel in Friday's New York Times.

Among the examples in that piece: In New York, Time Warner Cable has turned down ads from Verizon for its DSL offering; Verizon says it's also been unable to advertise on Comcast Cable in Philadelphia, Washington, D.C., and elsewhere; and local phone service powerhouse SBC says it's been shut out by Time Warner in several Texas cities and by Cox Cable and others in various markets. A consumer group spokesman grouses that all this is "blatantly anti-competitive."

But is it wrong? Well, not necessarily. The cable companies have a point when they say that, really, it seems a bit much to expect them to provide a platform for direct competitors. It's not like we expect McDonald's to have to agree to go along with a special promotion involving coupons for Burger King. A spokeswoman for Cox told the Times: "We don't have any formal written company policy that says we won't accept D.S.L. advertising. But typically, we do not accept D.S.L. advertising because it is within our right to decide what advertising to carry on our cable networks." This first bit is a smoke screen since it really doesn't matter if a de facto policy exists in formal, written form. But the second part is legit: These companies are perfectly welcome to turn away advertising. Another cable mouthpiece in the Times story goes so far as to say it's "within our First Amendment rights."

Of course, it's a little unusual to invoke the First Amendment in defending one's role in limiting the spread of information. And it's that kind of rhetorical overreaching that makes me think the cable companies' position, even if technically correct, is a little fishy. Another response, if the cable firms felt good about their actual competitive advantage over DSL broadband rivals, would be simply to run ads of their own debunking or countering their competitors' claims—that sounds a little more in the spirit of the First Amendment, if that's the context you want to use. And it's not unreasonable to argue that the result would be a generally greater interest in broadband service, which ought to benefit all legitimate competitors.

There is some mention in the article of an appeal to the Federal Trade Commission. If the FTC does wade into this issue, you can expect the usual moaning and groaning about the government screwing around with the forces of the market—even if its goal, as it often is in such cases, is to thwart the efforts of a company that seems to be screwing around with those forces. Still, it would probably be best for all concerned if the FTC did not have to get involved. The telecom companies offering DSL service are not exactly without resources, and if what they're offering is better, consumers are likely to get that message. But as much as this is an argument against interference from outside forces, it's also an argument against the cable companies' current strategy of trying to hide the existence of rivals. The main thing that such a strategy suggests is that, for whatever reason, they aren't quite up to real competition.